Need quick access to money to meet emergency financial needs? Bridging loans are a popular form of securing funds quickly and efficiently in the UK. Bridging loans can be used for various residential and commercial reasons, such as refurbishing a property to sell it for a higher price or buying or selling a home at the same time. Bridging loans help you fill the gap between the two financial transactions.
The UK bridging finance market has over a thousand lenders, ranging from large lending companies to private individuals. All these lenders have different lending criteria, such as fees, interest rates, security, assets and loan sizes. That is why it is crucial to be familiar with some common criteria that you are most likely to encounter. The better you are informed about bridging loan lending criteria, the faster and more easily you can go through the loan application. You will get bridging finance solutions in just one call.
Bridging Loan Lending Criteria Eligibility in the UK – Requirement
Lending criteria differ from lender to lender, and every lender may have his own set of rules and conditions that the borrower needs to follow to secure the loan. Typically, lenders consider the following eligibility criteria to evaluate your application.
#1 Loan Size
The loan size is the minimum and maximum amount of money you can borrow through bridging finance. Usually, the minimum personal bridging loan starts from £10,000, while commercial bridging loans have much higher minimums, typically from £50,000. The maximum loan size will depend on several factors, such as the value of your asset being used as security.
The maximum LTV is 70% of the open market value, but some loan providers may also offer up to 80% LTV. That means there is, technically, no upper limit to the amount of money you can borrow. Every lender will present the levels of loan they offer. So, based on your requirement, you can approach lenders.
#2 Loan Term
The loan term refers to how long you wish to borrow the money. A bridging loan is meant for fulfilling short-term financial gaps, which means they are usually taken out for between 3 and 12 months. However, in some special circumstances, the bridging loan can also be extended for 24 months.
It is also important to note that if you are taking out a regulated bridging loan (residential purposes), it is limited to 12 months period only imposed by the FCA (Financial Conduct Authority). For unregulated bridging loans (commercial and buy-to-let properties), you may be granted loans for an extended period, but they are not controlled by FCA.
Bridging loans are secured loans which means you need to put down a physical asset while applying for the loan. It is commonly secured against the land or property as a first or second-charge loan. A first charge loan involves a property that is used to secure a loan that does not have any existing loans or mortgages secured against it.
A second charge loan involves a property that already has a mortgage secured against it, but has sufficient equity available. Lenders may ask for one or more than one property to be used as collateral depending on the value of your property and the funds you wish to raise. In case, you fail on the repayments, the lender has the authority to repossess your property or properties put down as collateral.
#4 Credit History
A good credit score will most certainly increase your chances of being approved for bridging finance. However, some lenders may still accept your application if you have bad credit. Unlike a traditional mortgage, credit history is not that important in bridging loans. Most lenders are majorly concerned with security.
As long as you provide sufficient assets as security, there are many lenders that are happy to lend money even if you don’t have a good credit score. If you have a poor credit score, but you are still looking for a reliable bridging loan provider, BridgingFinance4U can help you connect with lenders who can work for you.
#5 Asset Value
The asset or the value of the asset is another important bridging finance lending criterion. The amount of money you can borrow is directly dependent on how much worth of assets you can put as collateral. Most lenders prefer property or land as security assets, but the lending criteria may differ based on the type of property, land or assets, the quality of the asset, its location, future opportunities and many more. So, the more worth of assets you own, the more funds you can raise through bridging finance.
#6 Exit Strategy
Demonstrating a viable exit route is mandatory when it comes to securing bridging finance. In simple terms, lenders would want to know how you will repay the loan. Based on how strong your exit plan is, the lenders can evaluate the level of risk associated with giving the loan to you and then approve the loan.
Some common exit strategies for bridging finance include selling a property or asset, refinancing your existing home, money that is due, and money from an inheritance or policy reaching maturity. If you fail to show a viable exit strategy, you may not qualify for bridging finance.
There are many other factors that lenders consider as a part of their lending criteria. Some of these include, but are not limited to:
• Age of the applicant
• Proof of income
• Condition of the property
• Location of the property
• Purpose of taking out a bridging loan
Conclusion – Does a Bridging Loan Affect Your Credit Score
Bridging finance has increased considerably in the UK. That is because they can be used for both residential and commercial purposes. Whether you are looking to buy a new home before your existing home is sold, buying a property at auction, funding renovation work, paying urgent debts, maintaining business cash flow transactions or expanding your business, taking a bridging loan is quick, efficient and easy, as long as you follow all the lending criteria. If you think any of the above criteria can hurt your chances of approval, take measures to resolve them before you apply. Click to Blog